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What is the Al Khairat power station project? +

When the Ministry of Oil begins planning to implement the latest refinery in the country, which is the Karbala refinery with a capacity of 140,000 barrels per day, and because the refinery’s production includes the production of heavy, high-sulfur fuel oil (black oil) at a rate of 18 to 20% of the filtering capacity, i.e. an estimated quantity of 9 million liters/day with a very high sulfur content (6 % wt). The Ministry of Oil in coordination with the Ministry of Electricity decided, to establish a thermal electric power station to be allocated to consume that quantity to ensure the sustainability of the refinery's work on one hand and to supply the national electric power system on the other, in order to fill the large deficit between the volume of generated energy and the volume of energy required.


Brief History?

After several attempts to establish the project, and in light of the work progress on the Karbala refinery project, the Ministerial Energy Council issued a recommendation approved by the Council of Ministers at the beginning of 2019 to refer the plant project to the Korean Hyundai Company and by (EPCF) contracting method, i.e. an Engineering-Procurement-Construction and finance contract (through a loan).

Hyundai's implementation of the project has been impeded because the necessary funding was not secured, as the agreement included that the Ministry of Electricity, through the Ministry of Finance, would secure 15% of the project value.

Considering the inability of the government to provide the above allocations, Cabinet decision No. 107 was issued in September 2020 to cancel the referral to Hyundai and authorize the Ministries of Electricity and Oil to find alternative solutions to complete the Al Khairat Thermal Power Plant project.

Harlow International Company submitted its offer for the establishment of the thermal power plant project with two options: The first is by contracting method (EPCF), ie Engineering-Procurement-Construction and financing. The second is by contracting method (BOO), i.e. build-operate-ownership (fully financed by the company without the Ministry of Electricity bearing any amounts).

Other companies have submitted a bid for the plant, but at a much higher rate than Harlow. After studying the offer submitted by Harlow International Company by the Ministry of Electricity and the National Investment Commission, the Ministry of Electricity recommended on November 2020 to proceed with contracting with Harlow Company according to the (BOO) method, i.e. build-operate-ownership, which spares the Ministry of Electricity any financial burdens on the implementation of a project.

The Ministry of Electricity and the National Investment Commission have negotiated with Harlow International and reviewed the technical and commercial bids to reach a recommendation agreement with the Energy Ministerial Council. Several decisions were made by the Ministerial Council for Energy and the Council of Ministers at the end of 2020 to refer the Al-Khairat Thermal Power Plant project to Harlow International Company, using the BOO method. Harlow has submitted a robust financial plan that has been reviewed and approved by the Central Bank of Iraq.

What is the main purpose and objective of establishing the project? +

Discharging and consuming quantities of high sulfur fuel oil (HSFO) produced from the Karbala refinery to ensure the operational continuity of the Karbala refinery, meaning the electrical station can be considered the lifeline of the refinery.

Providing the electric power system with an average of 2,800-megawatt hours/day (net energy, which means building a plant with a capacity of 3200 megawatts) contributes to filling a large part of the deficit between supply and demand, as the actual need is currently estimated at 30 thousand megawatts and the current production (government sector and investment sector). With imported energy amounting to 20 thousand megawatts, meaning there is a deficit of up to 10 thousand megawatts, with a projected increase in demand estimated at 5% annually.

Contribute to the stability of the work of the national electrical network, as thermal power stations are the backbone of the national system. The project will provide direct and indirect positive effects on communities and the national and local economy of the holy governorate of Karbala in terms of job opportunities that the project will provide during the construction and operation period, with the planned establishment of international level training centers within the project to prepare specialized technical staff in various fields.

What are the official approvals issued for the Al-Khairat thermal station project? +

The decisions of the Ministerial Council for Energy and the Council of Ministers were issued to refer the project to Harlow International and upon the recommendation of the Ministry of Electricity, after discussion and review of what was submitted by the Ministry of Electricity and the National Investment Authority, all the fundamental approvals were obtained to establish the project. A contract for the implementation of the plant was signed with the Ministry of Electricity and the National Investment Authority.

A power purchase contract was signed with the Ministry of Electricity. For the first time at the level of power plant investment contracts, a fuel supply contract is signed with the Ministry of Oil to organize the contractual mechanism between the concerned parties (the investing company - the Ministry of Oil - the Ministry of Electricity) with the letter of the Economic Affairs Committee in the Council of Ministers No. 611 in 2008 which included a fuel supply contract signed with the Ministry of Oil to ensure the station's operation.

What is the contractual mechanism of the project? +

(BOO) Contracting i.e. Build-Operate-Ownership (fully financed by the company without the Ministry of Electricity bearing any amounts).

Is the Al-Khairat station project a government project or an investment? +

Al-Khairat power plant is an investment project that doesn’t require the government to bear any financial matters.

Does the Iraqi government or the public treasury incur any debts or costs as a result of setting up the project? +

The Iraqi government or the public treasury does not incur any amounts, and no budget allocations are made for the establishment of the project.

Does the operation of Al-Khairat thermal power plant require importing fuel from abroad? +

No, the outputs of the Karbala refinery and the available liquid fuels will be mainly relied upon to operate the station and the without the need to import fuel from abroad to operate which will result in achieving the continuity of the plant's operation and the energy supplied to the national grid, which means that the Ministry of Electricity and the Public Treasury will not bear the burden for buying fuel from abroad, whether importing natural gas or gas oil.

Have the project referral stages been audited by the concerned oversight authorities in the Iraqi government? +

Yes, the stages of project referral have been reviewed and audited by the Federal Bureau of Financial Supervision.

Is the project included in the budget law? +

The Al-Khairat thermal station project was included in the Federal General Budget Law of the Republic of Iraq for the fiscal year 2021 No. (23) for the year 2021.

What is the planned period for establishing the project and starting the actual operation? +

48 months to complete the entire project. 

What is the role of Harlow International company in developing the station? +

The role of Harlow International Company as a developer and investor for the project started from planning, studying the project, and providing options for contracting according to a technical model and a commercial financial model, leading to the formation of a technical team, a commercial financial team, and a legal one within the company, with contracting with a global consultant (Fichtner) German company as an engineering consulting company (PMC) for the project And later, after preparing the requirements and documents for the project by the cadres of the Harlow company, the Chinese company CITIC was chosen to implement the project, as the Harlow company with its cadres completes all the requirements for the project, including the preparation of technical and commercial documents, the completion and obtaining of all approvals from all concerned authorities, with the completion of site preparation and business Civilian, with the specialized companies it owns within the group, while undertaking all logistical support work The company's cadres will manage the implementation process and contribute to the completion of the works along with the engineering company that will implement the project, with plans to assume the role of operating the station later, especially since the project is 25 years old, taking into account the previous experience of Hyundai, which was not successful with a mechanism Contracting in the EPCF style, so it requires the existence of a company that assumes this role (Harlow Company) as an owner and developer company that manages all project links (administrative - technical - commercial).